Alan Caron: Instead of tax breaks for a few, invest in many entrepreneurs

We had a fascinating conversation in Maine about a year ago over how many hundreds of millions in loan guarantees and tax deductions we should provide to a company that wanted to build composite aircraft in Brunswick. We eventually lost the bidding war to a Midwestern state that was willing to plunk down a package worth $300 million.

In the predictable finger-pointing that followed, hardly anyone questioned the company’s qualifications or viability. Their first prototype, for instance, “may” be in the air in 2015. The market for small aircraft is already overcrowded with legacy companies like Cessna, Piper and new challengers in Europe and Asia, all fighting over a shrinking market glutted with used aircraft that, unlike our cars, are perfectly usable for 30 to 40 years.

This is what happens when we get into a debate about providing tax breaks for companies. It’s all about what we could get and almost never about what we might lose, or whether the investment will actually create lasting, quality jobs.

In this case, for instance, the prospect of 300 to 600 jobs was dangled before our job-starved state. In the fine print: Those jobs would only happen if the initial design were approved by the FAA, it could be mass-produced affordably and, in the end, people actually bought it.

I’m all in favor of tax breaks that produce good jobs, but how many of these grand schemes, presented with fanfare at press conferences, actually pan out? Here’s a little-discussed secret about most tax breaks: We haven’t the faintest idea.

We get mesmerized by the initial hoopla, the promises and ribbon-cutting. Politicians, companies and even the media love the splashy announcements. Then the circus moves onto the next stop. Who’s poking around five or 10 years later to see how it worked out? That would be nobody.

Maine’s budget is larded with tax breaks for companies that have made lots of promises and have good lobbyists. The irony in Augusta is that the very people who yell the loudest about tracking down every welfare dollar and tightening the budget for schools don’t even ask about how those large expenditures of public money are paying off, as though money taken from the bottom line for spending and tax deductions doesn’t all come out of the same pot.

It’s as though millions of public dollars that go to rich corporations require no scrutiny because rich, successful people are inherently truthful and earnest. But woe to the lonely single mom with a kid on each hip seeking help. She is left to bear the full weight and scorn of the disgruntled taxpayers.

I’ve never understood that and hope I never will.

Here’s another idea for a more prosperous future. By all means, let’s invest in new businesses and jobs, with tax deductions and loan guarantees, as every other state does. But instead of plunking down $300 million to support one company with more questions than products, let’s invest that same amount in 3,000 budding entrepreneurs across the state.

If we want to make Maine a leading entrepreneurial magnet, and a place widely known for growing startups and small businesses, we have to put our money where our dreams are.

We could start with research and development bonds. Instead of thinking small and arguing over tiny bonds every five years, how about putting put some muscle into it?

Let’s put a $100 million dollar research and development bond before the voters every two to four years for a decade, as part of a program to build the next economy. While we’re at it, let’s make sure the majority of those funds go to the little guys, to grow new products and ideas.

We can do that by upsizing something we’re already doing well in Maine (yes, it happens). Take the highly successful Maine Technology Institute program and scale it up. MTI has a track record of prudently investing in new ideas and products in Maine, through small startup grants, micro-loans and then larger loans as companies move from concept to success. Let’s make MTI’s work the centerpiece of an emerging incubator state.

Rather than putting all our eggs into a few large baskets, we can diffuse our risk by supporting a wide array of tinkerers, creators and entrepreneurs. That’s the way to elevate our own crazy dreamers like Bill Gates or Steve Jobs. Building our future, from the ground up, requires us to invest in the people here in Maine who are already doing great things.

Alan Caron is a principal of the Caron & Egan Consulting Group, which works with companies, governments and nonprofits to plan and achieve goals and to more effectively collaborate. He also serves as president of Envision Maine, a nonpartisan organization that promotes Maine’s next economy. He can be reached at [email protected]

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